Charities have a role in public services, but not as surrogate businesses

22 January 2018

An urgent review of this model of public service delivery is needed, argue David Walker and John Tizard

David Walker, left, and John Tizard

The landscape of the UK and in particular England’s public services has changed dramatically over the past few decades. It has been changed by the growth in outsourcing to the business sector and, to a lesser extent, to the charitable and social sectors. This outsourcing is now being challenged, and rightly so.

The significant growth in both the volume and the scope of outsourcing has been to a small number of large companies that dominate their markets. And, as we have witnessed with Carillion, this can be very damaging to the public and public services.

The public sector has often tended to regard the charity and social enterprise sectors as little different from major corporates. They have been expected to bid for contracts and, all too often, expected to subsidise, which of course corporates would not do!

Incredibly, the growth in outsourcing and the political and technical factors that have driven it have not been subject to any systematic review or analysis of its effectiveness. This absence of evidence and analysis has not been in the public interest.

So, as we explore in our Smith Institute report Out of Contract: Time to Move On From the ‘Love In’ with Outsourcing and PFI, published today, there is an urgent need for a major review of this model of public service delivery.

We believe that such a review should explore the benefits and dis-benefits of outsourcing, when it might be appropriate and when not, and what different providers can or cannot bring to the delivery of public services. This means that the role and impact of charities should be part of the review.

In addition to an overarching review of the policy and its impact, we are calling for a root-and-branch review of all significant contracts. A condition for contracts should be that they deliver the public interest of efficiency, effectiveness and social value.

We argue that public sector bodies adopt transparent "make-or-buy" criteria by which to decide whether to use external providers or to manage services in-house. Such criteria should include technical and operational considerations, a holistic approach to public benefit and cost, and how wider policy goals might be advanced by different delivery options. This could offer opportunities for the voluntary and charity sector if public bodies are mindful of the characteristics and attributes of the charity and social sectors when making their make-or-buy decisions.

In the report we acknowledge a role for charities and the social sector in the delivery of public services. This may be as provider under contract or supported by grant, as an advocate, as source of a user and community voice and in other ways.

However, the evidence is that a competitive contracting approach and outsourcing have transformed the role and nature of many charities and the social sector. It has changed their behaviours. It has sometimes driven a wedge between some large commercially minded charities and smaller community groups. Many charities have adopted the language and sometimes behaviours of outsourcing businesses, of new public management and neo-liberalism, which is far from their origins, values and missions.

This has, in part, been inevitable – with, for example, some large national charities establishing large bid teams, focusing on contract wins ahead of community engagement and, more significantly, failing to work with local voluntary and community groups. Large-scale contracts have fuelled this approach. However, there is no value in a charity seeking to emulate Serco or similar.

Charities and the wider social sector should use the contemporary debate about outsourcing to demonstrate that they are different from large corporates by promoting their positive attributes – being driven by a social purpose, not distributing profits to shareholders and being firmly based in their communities (though not all charities currently are). Many organisations provide specialist services to specific groups of service users and communities, especially those that are far from and/or alienated from the official services and services such as advocacy. Some of the sector’s organisations are user-led. They might be able to be innovative and manage risks in ways that the public and business sectors can’t or choose not to.

However, we are not arguing that services should automatically be delivered on behalf of the public sector by charities, especially large national charities that are seeking simply to copy the private sector. Nor are we arguing that charities automatically meet social value criteria simply because they are charities. We are arguing that charities and social organisations have a role to play in complementing and supporting, as well as challenging in-house public services, which should be the default option. This will require charities and the social sector to be transparent and accountable, and above all to demonstrate that they can deliver in a reliable way.

This is a pivotal moment for the future of public services, the new public management model of outsourcing is on the wane. This opens opportunities for the charity and social sectors. They must grasp these opportunities.

John Tizard (@johntizard) is an independent strategic adviser and commentator, and a former voluntary sector executive. He is now a trustee and chair

David Walker is contributing editor at Guardian Public and a former director of the Audit Commission

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